The elections are coming! The elections are coming!
Yes, it's an election year in America but the world is going to be watching another vote this weekend in Greece. Rarely does an election in a country as small as Greece have global implications -- Greece produces less than 2% of Europe's GDP. But we live in unusual times.
On Sunday, Greek voters will go to the polls to choose not just a new government but whether the country will stay in the Euro zone. The vote could have massive ramifications for the future of the European Union, the financial markets and, by extension, the U.S. economy. Fearing the worst, Greek citizens have been pulling money out of their banks and stocking up on food ahead of the vote, The WSJ reports.
What happens in Europe very much matters to America. The European Union is America's largest trading partner and its debt crisis is
already hurting the global economy and crimping profits of big U.S. multinationals like McDonald's, which generates more than 40% of its revenues from Europe.
"In a worst-case-scenario this could precipitate a financial crisis way worse than Lehman Brothers," says Zanny Minton Beddoes, economics editor at The Economist. "That matters to jobs here; stock markets here. [It matters to] average Americans very dramatically."
In fact, it's not a stretch to say the Greek vote could help determine the outcome of America's Presidential election in November. That helps explain why President Obama spoke about the Greek election during his press conference last Friday:
"We've said that it is in everybody's interest for Greece to remain in the eurozone while respecting its commitments to reform. We recognize the sacrifices that the Greek people have made.... But the Greek people also need to recognize that their hardships will likely be worse if they choose to exit from the eurozone."
Greece has a parliamentary system and Sunday's vote features dozens of parties. The main event is between the more traditional parties -- led by New Democracy and PASOK -- that want Greece to stay in the Eurozone even if means accepting the harsh austerity measures demanded by the
EU and IMF, and agreed upon by prior Greek administrations. On the other side, leftist groups led by Syriza have said they will not meet Greece's prior commitments to cut spending and raise taxes -- the conditions put on Greece's bailout. In the runup to the election, Syriza leader Alexis Tsipras's has said he wants Greek to stay in the eurozone but has also called into question the legality of Greece's debt, effectively threatening to default if elected.
As you might imagine, this hasn't sat well with Greece's creditors, global investors, and most importantly Germany - the most powerful player in Europe.
German officials, up to and including Chancellor Angel Merkel, have publicly said Greece must live up to its obligations but that they want Greece to stay in the eurozone.
"The price if [Greece] decide to leave the euro is very high,"Germany's finance minister said last month. "It would cause a huge amount of turbulence for all of us."
And by "us" he very definitely means the U.S. of A. too.